On April 2, 2025, President Trump exercised his authority under the International Emergency Economic Powers Act (IEEPA) to impose “reciprocal” tariffs on U.S. trading partners through an executive order (the Order). These tariffs (Reciprocal Tariffs) aim to address trade deficits and eliminate barriers to U.S. exports.
Here’s what you need to know:
Under what legal authority?
IEEPA grants the president authority to regulate imports to “address any unusual and extraordinary threat, which originates in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States.” 50 U.S.C. §§ 1701-1702. In this case, President Trump declared a national emergency, citing “large and persistent annual U.S. goods trade deficits” caused by “the absence of reciprocity in our trade relationships and other harmful policies.” Read the order here.
Several companies have challenged the use of IEEPA for imposing these tariffs—those cases are ongoing.
What rationale does the White House provide for implementing the Reciprocal Tariffs?
The White House referenced the Office of the United States Trade Representative’s (USTR) Foreign Trade Barriers report in the Order, explaining that it “details a large number of non-tariff barriers to U.S. exports worldwide on a trading-partner-by-trading-partner basis.” The report linked above offers a country-by-country analysis of trade obstacles.
What Reciprocal Tariff rate applies and when?
Effective April 5, 2025, at 12:01 a.m. EDT, a baseline 10% tariff was imposed on imports from all countries except Canada and Mexico.
Then, on April 9, 2025, at 12:01 a.m. EDT, the 10% baseline rate was replaced with individualized rates for certain countries. Annex I of the Order lists the country-specific rates, which were assigned to nations with the largest U.S. trade deficits. These were increases from the 10% baseline, not additional tariffs, with rates ranging between 11% and 50%.
Increases Paused for Most Countries:
The increased Reciprocal Tariff rates remained in place for only one day. On April 9, 2025, the White House issued a second executive order suspending the country-specific rates (except for China), effective April 10, 2025, at 12:01 a.m. EDT. As a result, all countries except China reverted to the baseline 10% Reciprocal Tariff. This suspension will last for 90 days. Unless further modified, the higher rates will automatically reapply to the countries listed in Annex I on July 9, 2025, without the need for a new executive order.
China Subject to Increased Rates:
In the same executive order, the White House announced that China’s Reciprocal Tariff rate would be raised to 125%. This rate is separate from and in addition to any other duties or tariffs already in place.
What do the other annexes in the April 2 Order contain?
Besides Annex I, which identifies countries potentially subject to higher Reciprocal Tariff rates, the Order includes two more annexes:
- Annex II lists products excluded from Reciprocal Tariffs by their Harmonized Tariff Schedule (HTS) codes.
- Annex III establishes new Chapter 99 HTS codes, specifying duty rates and additional exceptions, and includes updated guidance in the HTS Notes for interpreting and applying the Reciprocal Tariffs.
Do the Reciprocal Tariffs apply based on the country of origin or export?
Tariff liability depends on the product’s country of origin, not the country of export. Thus, if a product originates from China but is exported from Mexico, it will still be subject to the 125% Reciprocal Tariff for China-origin goods, despite Mexico’s general exemption.
What if my goods are already en route to the U.S.?
Reciprocal Tariffs do not apply to goods that were loaded onto a vessel at the port of loading and were in transit before 12:01 a.m. EDT on the tariff effective date, as long as they are entered for consumption or withdrawn from warehouse for consumption after 12:01 a.m. EDT on the effective date but before 12:01 a.m. EDT on May 27, 2025.
Do the Reciprocal Tariffs apply to imported products containing U.S.-origin components?
If at least 20% of an imported product’s value consists of components entirely produced or substantially transformed in the U.S., the Reciprocal Tariff will apply only to the non-U.S.-origin portion of the product’s value.
How can I determine which new tariffs are applicable to my product(s)?
Our chart below outlines recent tariff developments, including the latest Reciprocal Tariffs, to assist importers in assessing whether the president’s new tariffs apply to their products.
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Are there any exceptions to the Reciprocal Tariffs?
Yes. Certain products are exempt from the Reciprocal Tariffs. Excluded items include:
- Articles covered under 50 U.S.C. § 1702(b) (such as personal communications, donations, and personal luggage)
- Steel, aluminum, and automobile/auto parts already subject to section 232 tariffs
- Specific copper and lumber articles, pharmaceuticals, and semiconductors listed in Annex II
- Any articles that may become subject to future section 232 tariffs
- Articles facing Column 2 duty rates from countries without normal trade relations with the U.S. (Belarus, Cuba, North Korea, and Russia)
- Bullion
- Energy products and certain minerals not available domestically
- Other articles specifically identified in Annex II of the Order
On April 11, 2025, President Trump issued a memorandum clarifying which semiconductor products qualify for exclusion from the Reciprocal Tariffs. The memo states that smartphones, automatic data processing machines, magnetic or optical readers, flat panel modules, electronic integrated circuits, and certain semiconductor devices and parts fall within the semiconductors exemption and are therefore excluded from the Reciprocal Tariffs. This clarification is retroactive to April 5, 2025, allowing importers to retroactively apply the exemption to qualifying products.
What is the Reciprocal Tariff rate on China-origin products?
Following retaliatory tariffs imposed by China on U.S. goods, Trump signed a second executive order on April 8 raising the Reciprocal Tariff rate on China from 34% to 84%. As noted earlier, a third executive order on April 9 further increased the rate to 125%. Effective 12:01 a.m. EDT on April 10, 2025, China-origin products are subject to a Reciprocal Tariff of 84% in addition to any other applicable tariffs.
How do the Reciprocal Tariffs interact with other tariffs, including existing IEEPA and section 232 tariffs?
The Reciprocal Tariffs are imposed in addition to pre-existing tariffs, including the general duty rate, section 301 tariffs on China-origin goods, and IEEPA tariffs affecting Canada, Mexico, and China. These tariffs stack cumulatively. For instance, if a product faces a 6.5% general duty, a 25% section 301 tariff, a 20% China IEEPA tariff, and a 125% Reciprocal Tariff, the total duty burden would be 135.5%.
How does the Order affect existing IEEPA tariffs on Canada, Mexico, and China?
The Order leaves current IEEPA tariffs for Canada and Mexico unchanged. U.S.-Mexico-Canada Agreement (USMCA)–compliant goods will still enjoy a 0% (zero percent) IEEPA tariff, while non-USMCA-compliant goods remain subject to a 25% IEEPA tariff (and 10% for non-USMCA-compliant energy and potash). Should the administration revoke these IEEPA tariffs, USMCA-compliant goods would continue to benefit from preferential treatment, while non-compliant goods would then be subject to a 12% Reciprocal Tariff.
For China, the existing 20% IEEPA tariff remains in effect in addition to the new 125% Reciprocal Tariff, totaling 145% in tariffs.
If my product is subject to section 232 steel and aluminum tariffs and is China-origin, do I still owe the previous 20% China IEEPA tariff?
Yes, the 20% China IEEPA tariff continues to apply alongside the section 232 steel and aluminum tariffs. However, products subject to section 232 steel, aluminum, and automobile tariffs are exempt from the Reciprocal Tariffs. As a result, only the 20% IEEPA tariff and section 232 tariffs will apply, not the 125% Reciprocal Tariff.
Is the de minimis exemption still available?
Currently, the de minimis exemption remains available for products subject to the Reciprocal Tariffs, allowing duty-free importation of shipments valued under $800—until the Secretary of Commerce determines that sufficient systems are in place to collect revenue on de minimis-eligible goods. At that point, the exemption would end.
However, a separate executive order ends the de minimis exemption for goods from China and Hong Kong starting 12:01 a.m. EDT on May 2, 2025. This policy was modified again on April 8 and April 9 following Chinese retaliatory tariffs. Now:
- For non-mail shipments previously eligible for de minimis: all applicable tariffs apply (e.g., MFN, IEEPA).
- For mail shipments previously eligible: subject to a 120% tariff if the carrier reports the value, or a $100 per product fee if the carrier does not report the value (increasing to $200 on June 1, 2025).
- Customs and Border Protection (CBP) may require formal entries at any time.
Currently, Macau-origin goods are excluded from the de minimis restrictions, but USTR is reviewing this.
Is drawback (duty refund) available for the Reciprocal Tariffs?
Drawback is available. Although the Order itself did not specify this, CBP confirmed via an additional guidance on April 4, 2025, that importers can claim up to 99% of duties paid under the Reciprocal Tariffs for goods that are exported or destroyed without entering U.S. commerce.
Is Chapter 98 impacted by the Reciprocal Tariffs?
Generally, products properly classified under Chapter 98 are not subject to Reciprocal Tariffs. However, exceptions include:
- Goods exported for repairs or alterations and re-imported into the U.S.: the Reciprocal Tariff applies only to the value of the foreign repairs.
- U.S. components assembled abroad: the Reciprocal Tariff applies only to the value added abroad.
Examples:
- A $5,000 product sent abroad for $1,000 in repairs would incur tariffs only on the $1,000 repair.
- A $4,000 product assembled abroad with $2,500 in U.S. parts would be taxed only on the $1,500 foreign value.
What is the impact on Foreign Trade Zones (FTZs)?
Goods eligible for “domestic status” under 19 CFR 146.43 are not affected. However, goods entering FTZs on or after April 9, 2025, must be admitted as “privileged foreign status” under 19 CFR 146.41, locking in the duty rate. The Order does not clarify how it impacts goods admitted before April 5, 2025.
When will the Reciprocal Tariffs end?
The Reciprocal Tariffs will remain until President Trump determines that the threat from trade deficits and nonreciprocal treatment has been “satisfied, resolved, or mitigated.”
How were the Reciprocal Tariff rates calculated?
Country-specific Reciprocal Tariffs were calculated based on the tariffs that each country imposes on the U.S. The following formula was reportedly used to calculate the imposed tariff rates: Trade deficit with country X ÷ total imports from country X.
Reported tariff calculation = total exports – total imports (trade deficit)
total imports
The USTR published a slightly expanded formula where:
- ε = price elasticity of import demand (set at 4)
- φ = elasticity of import prices with respect to tariffs (set at .25)
- ε and φ cancel each other out, since 4 x .25 = 1
- Xi = total exports to country X
- mi = total imports from country X
USTR Tariff Calculation = total exports – total imports (trade deficit)
4 x .25 x total imports
Thus, this formula matches the one referenced above. To determine the Reciprocal Tariff rate, the tariffs that each country imposes on the U.S. are calculated and then divided by two.
Can trading partners modify their tariff rates?
Yes. The Order grants authority to modify the Reciprocal Tariffs: Trump can raise tariffs if partners retaliate or lower them if partners work toward resolving non-reciprocal trade practices.
How have other countries retaliated?
- China imposed a 34% retaliatory tariff on U.S. goods, prompting Trump to increase the Reciprocal Tariff to 84%, then to 125%. China matched each increase.
- China also initiated a WTO dispute consultation over the Reciprocal Tariffs, the third such action against U.S. tariffs this year.
- Canada imposed a 25% tariff on U.S. autos on April 9, 2025, alongside existing retaliatory tariffs.
- European Union (EU) initially approved a 25% tariff response to U.S. section 232 tariffs but paused enforcement for 90 days following the U.S. pause on country-specific Reciprocal Tariffs.
- United Kingdom (UK) opened a consultation on potential retaliatory measures and is negotiating an exemption.
The tariff environment is rapidly evolving. Companies should closely monitor their tariff classifications, origin documentation, and supply chain structures to minimize exposure.
For specific advice, please contact our Import Compliance team or give us a call at 518-785-6000.
